How PPC Cost is calculated in Google AdWords

Google AdWords PPC Cost Calculation

Before we talk about How Exactly PPC Cost is Calculated or How Google Charge Costs for Ad Clicks, we have to understand “Bidding” and “Page Rank”.

What is Bidding ?

Bidding is the amount you want to pay for One Click on your Ads. It’s a one kind of Auction for a specific keywords against your Competitor’s Ads.

 

You can see in the above image that there are 4 Companies competing for a particular Keyword through Ads on Google Adwords, viz.

  • Company A – Bidding $100 for a particular Keyword.
  • Company B – Bidding $90 for a particular Keyword.
  • Company C – Bidding $80 for a particular Keyword.
  • Company D – bidding $75 for a particular Keyword.

 

Bidding is NOT CPC or PPC :

  • Multiple companies Bid for Specific Keywords and what people think is.. “If I had created an Ad with Bid of $100, then Google will charge you exact $100 when someone clicks on your Ads. THIS IS WRONG FRIENDS.
  • Bidding is MAXIMUM Amount you are willing to pay for a particular Keywords Ad Clicks to stay ahead in competition. It’s not that the PPC cost is always equals to your Bidding Cost. It’s just maximum amount and your PPC Cost can be lesser than that.

 

Now the Question is.. “If Google don’t always charge on Bidding, then HOW PPC COST IS CALCULATED?”

The Answer is… “You have to just pay a little more enough to beat your Next Competitor’s Bidding Cost.”

Let’s understand with an example given in below image :

 

Bidding Calculations :

As you can see in the above image, Company A has maximum Bid of $100 and if someone clicks on his Ads, Google will Not Charge $100, but it will Charge (PPC Cost), just to beat the your NEXT Competitor, i.e. $90.01

Generally people consider Bidding Cost as their Actual PPC Cost and hence they put their Bidding Low and hence their Ads are NOT shown on First Page. Hence Bidding is the MAXIMUM Cost which Google may charge for Clicks on your Ads and it’s not necessary that everytime google will charge Maximum Amount.

In the same manner if some one clicks on Company B’s Ads whose bidding is $90, then Google will not charge the Bidding as CPC, instead it will charge $80.01 only. i.e. just enough to beat your next competitor.

In the same manner if some one clicks on Company C’s Ads whose bidding is $80, then Google will not charge the Bidding as CPC, instead it will charge $70.01 only. i.e. just enough to beat your next competitor.

Hence Bidding is NOT ALWAYS EQUAL TO PPC or CPC.

Ok. Now you understood how Bidding plays a vital role in calculating your CPC.

And people generally thinks that “The company Bidding Highest Amount or Ads with highest PPC is shown FIRST.” THIS IS WRONG.

“Bidding is not the ONLY Factor for Ads shown on first page.”

It’s the combination of “Bidding”  +  “Page Rank”, that will decide, whether your Ads will be shown on First Page or Not

 

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